U.S. Court of Federal Claims Issues Statute of Limitations Opinion on Fraud Claims

The United States Court of Federal Claims recently issued an opinion discussing the six-year statute of limitations on fraud claims. In Lodge Constr., Inc. v. United States, No. 13-499, 2021 WL 1418847 (Fed. Cl. Apr. 14, 2021) the court concluded that the six-year statute of limitations period begins to run when an alleged fraud is committed.

The Facts

The Army Corps of Engineers awarded a contract to the plaintiff to repair a levee in Florida. As part of its work, the plaintiff designed and built a temporary cofferdam.¹ After plaintiff constructed the cofferdam, which was previously approved by the Government, water breached portions of the structure's wall.

The Government then retroactively disapproved of the plaintiff's design of the cofferdam and requested that plaintiff submit a new design. In lieu of submitting a new design, plaintiff submitted two certified claims for its work on the project.

The Government subsequently terminated the plaintiff for failing to submit the new design and denied the plaintiff's claims. The plaintiff, in turn, brought suit against the Government, which asserted counterclaims alleging that the plaintiff committed fraud in submission of its claim.

The plaintiff, after a few years of discovery, moved for summary judgment as to the Government's fraud claims, claiming that they were time-barred under the anti-fraud provision of the Contract Disputes Act (CDA). It argued that the CDA required that "[l]iability under this paragraph…be determined within 6 years of the commission of the misrepresentation of fact or fraud."² The Government argued that the court should apply the "discovery rule" that triggers the limitations period only after the Government knew or should have known about the alleged fraud.

The Court's Decision

The court, citing the U.S. Supreme Court, sided with the plaintiff and held that under a plain reading of the CDA, the "six-year clock begins ticking when the fraud occurs, not when the Government discovers it."³ Further, the court found that when the CDA used "determined," it meant a binding court ruling and could not mean a determination by a governmental organization.

Takeaways

This will likely have multiple negative ramifications for contractors going forward. Most importantly, it could lead the government to more forcefully and frequently assert fraud-based claims. This decision may also lead to congressional action to amend the CDA to provide the Government additional time to file its claims.

FOOTNOTES

1  A cofferdam is a watertight enclosure pumped dry to permit construction work below the waterline, as when building bridges or repairing a ship.
2  41 U.S.C. § 7103(c)(2).
3  2021 WL 1418847, at *4.